The Allahabad Bench of the National Company Law Tribunal (NCLT) on 27 October admitted a Section 7 petition filed by Sital Leasing and Finance Limited against Sybly Industries Limited, initiating the corporate insolvency resolution process (CIRP).
A Bench comprising Judicial Member Praveen Gupta and Technical Member Ashish Verma observed:
“The mere assertion that the Corporate Debtor possesses market receivables or is willing to repay the outstanding dues at a later date cannot, in the absence of an established arrangement accepted by the Financial Creditor, extinguish or negate a default that has already occurred.”
The financial creditor filed the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), seeking initiation of CIRP against Sybly Industries.
According to the petition, Sybly Industries approached the financial creditor in September 2024 seeking financial assistance of Rs. 2 crore. The creditor sanctioned an unsecured term loan of Rs. 1.50 crore on 23 September 2024, carrying interest at 12% per annum and repayable over twelve months.
The parties executed a loan agreement on 26 September 2024, and the creditor disbursed the amount through RTGS on the same date. Repayment installments were scheduled to commence on 26 October 2024.
The creditor submitted that Sybly Industries failed to pay the installments due on 26 October, 26 November and 26 December 2024. Although the company made a small interest payment in October 2024, it did not make the scheduled repayments. The creditor consequently issued a recall notice on 15 January 2025, demanding the outstanding amount along with accrued interest.
Subsequently, the parties entered into a Settlement-cum-Restructuring Agreement on 20 February 2025. Under the agreement, Sybly Industries acknowledged its outstanding liability of Rs. 1.54 crore and undertook to make a one-time lump-sum payment by 20 June 2025.
Moreover, the agreement recorded the earlier defaults and expressly clarified that the settlement would not amount to a waiver of default under the original loan agreement. However, Sybly Industries failed to make the payment within the extended timeline.
Therefore, the creditor issued a further letter on 25 June 2025, declaring the settlement arrangement ineffective and reviving the obligations under the original loan agreement. It thereafter approached the Tribunal under the IBC.
Opposing the petition, Sybly Industries argued that the proceedings were essentially recovery proceedings and contrary to the objective of the IBC. It sought additional time to repay the dues, claiming that it could realise its market receivables to meet the outstanding liability.
It also alleged that the settlement agreement had been executed under coercion and on the basis of oral assurances that a more favourable restructuring arrangement would subsequently be executed.
The Tribunal examined the sanction letter, loan agreement, bank statements, recall notice and settlement agreement and held that these documents collectively established the existence of financial debt and the occurrence of default. It observed that the settlement agreement contained an express acknowledgement of the outstanding liability and recorded the earlier defaults.
It held that the corporate debtor's willingness to repay the dues at a later date, or its request for additional time, could not extinguish an existing default. The availability of market receivables did not amount to actual repayment or discharge of the financial liability.
Rejecting the allegation of coercion, the Bench held that mere assertions of oral assurances, without sufficient supporting material establishing coercion or misrepresentation, could not override the express terms of a written agreement.
It also rejected the objection concerning the absence of a record of default from an Information Utility, clarifying that such absence was not fatal where other legally admissible documents sufficiently established the debt and default. It added:
“The willingness expressed by the Corporate Debtor to repay the outstanding dues, subject to an agreed payment schedule, is not equivalent to actual repayment or discharge of the financial liability. In the absence of any concluded settlement or evidence of payment extinguishing the default, such willingness cannot constitute a defence against the initiation of proceedings under Section 7 of the Code.”
Accordingly, the NCLT admitted the petition, initiated CIRP against Sybly Industries, declared a moratorium and appointed Mohit Goyal as the Interim Resolution Professional.
For Appellants: Advocate Adhish Srivastava
For Respondents: Advocate Parth Davar